U.S. Senator Elizabeth Warren has reached out to Elon Musk for details regarding X Money, a payment feature anticipated to be integrated into the X social media platform. According to Cointelegraph, Warren, a vocal critic of Musk and the cryptocurrency sector, expressed concerns in a letter about the potential risks X Money's stablecoin and cryptocurrency integrations could pose to the financial system and U.S. national security. She questioned whether the platform might issue its own stablecoin under a legal provision in the Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act, which permits private companies to issue stablecoins.
Warren highlighted that X Money's limited beta preview indicates it plans to offer a 6% interest on deposits and collaborate with Cross River Bank, which has faced enforcement action by the Federal Deposit Insurance Corporation (FDIC). She raised concerns about the potential risky investments or data monetization activities that X Money or Cross River might undertake to provide such yields, especially when the Federal Funds Rate is between 3.5% and 3.75%. Warren's inquiry could reflect a broader legislative pushback against private companies issuing stablecoins under the GENIUS regulatory framework, which allows tech firms and non-banks to issue US dollar-pegged tokens.
Warren also questioned whether potential X Money users are aware that their deposits would not be protected by FDIC insurance if the platform were to fail. In March, FDIC Chair Travis Hill clarified that stablecoin user deposits are not covered by FDIC insurance under the GENIUS Act. He stated that the Act specifies payment stablecoins are not "subject to deposit insurance" or guaranteed by the U.S. government. However, the legislation does not explicitly forbid stablecoin deposits from receiving pass-through insurance, which extends FDIC coverage to each customer of an eligible financial institution up to $250,000 in the event of a company failure. Hill noted that while the GENIUS Act does not strictly prohibit stablecoin companies from offering pass-through FDIC insurance to end users, doing so would be "inconsistent" with the broader regulatory framework.
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